NEW YORK - A FEDERAL judge on Monday threw a lifesaver to investors who may have been duped in one of Wall Street's biggest alleged frauds, saying they need the protection of a special government reserve fund set up to help investors at failed brokerage firms.

US District Judge Louis L. Stanton ordered that clients of Bernard Madoff's private investment business seek relief under a federal statute created to rescue cheated investors.

He also ordered that business be liquidated under the jurisdiction of a bankruptcy court and named attorney Irvin H. Picard as trustee to oversee that process.

Mr Stanton signed the order after the Securities Investor Protection Corporation asked that steps be taken to protect investors in the scheme, which has ensnared several major banks and prominent figures as victims and could result in as much as US$50 billion (S$73.5 billion) in losses.

Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts. Funds can be used to satisfy the remaining claims of each customer up to a maximum of US$500,000. The figure includes a maximum of up to US$100,000 on claims for cash.

The order came just days after federal prosecutors charged Madoff with securities fraud, saying he had admitted to orchestrating a massive Ponzi scheme. Madoff is free on US$10 million bail after he was charged with securities fraud last week.

SIPC President Stephen Harbeck said in a statement that the fund's task will be harder than in other bankruptcies because of the size of the misappropriation and the condition of the defunct firm's records.

He said it would be unlikely that the trustee can transfer the firm's customer accounts to a solvent brokerage firm. He added that it was impossible at this point to determine what share each investor might hold in any remaining assets.

From its inception through December 2007, the SIPC has advanced US$507 million and made possible the recovery of US$15.7 billion in assets for an estimated 626,000 investors, the fund said on its web site. -- AP